{"id":1474,"date":"2025-03-29T10:03:23","date_gmt":"2025-03-29T10:03:23","guid":{"rendered":"https:\/\/dev95.site\/behind-the-scenes-a-glimpse-into-tax-calculations\/"},"modified":"2025-03-29T10:03:23","modified_gmt":"2025-03-29T10:03:23","slug":"behind-the-scenes-a-glimpse-into-tax-calculations","status":"publish","type":"post","link":"https:\/\/dev95.site\/ar\/behind-the-scenes-a-glimpse-into-tax-calculations\/","title":{"rendered":"Behind the Scenes &#8211; A Glimpse into Tax Calculations"},"content":{"rendered":"<div id=\"dev95-1315056562\" class=\"dev95-- dev95-entity-placement\"><script async=\"async\" data-cfasync=\"false\" src=\"https:\/\/pl27862732.profitableratecpmnetwork.com\/2ad7a50e0bbc23ac6801d7b77c501463\/invoke.js\"><\/script>\r\n<div id=\"container-2ad7a50e0bbc23ac6801d7b77c501463\"><\/div><\/div><div>\n<p>In the past, sellers were responsible for managing and fulfilling their own tax obligations.<br \/>\nHowever, more and more jurisdictions are now requiring marketplaces such as Etsy to collect the tax from buyers and remit the tax to the relevant authorities. Etsy now plays an active role in collecting tax from buyers and remitting it all over the world. In this post, I will walk you through our tax calculation infrastructure and how we adapted to the ongoing increase in traffic and business needs over the years.<\/p>\n<p><strong>The tax calculation workflow<\/strong><\/p><div id=\"dev95-1956655306\" class=\"dev95- dev95-entity-placement\"><center>\r\n<script>\r\n  atOptions = {\r\n    'key' : '4ba6b6513c00e0ba76511f798ae56401',\r\n    'format' : 'iframe',\r\n    'height' : 50,\r\n    'width' : 320,\r\n    'params' : {}\r\n  };\r\n<\/script>\r\n<script src=\"https:\/\/www.highrevenueformat.com\/4ba6b6513c00e0ba76511f798ae56401\/invoke.js\"><\/script>\r\n\t<\/center><\/div>\n<p>We determine tax whenever a buyer adds an item to their Etsy shopping cart. The tax determination is based on buyer and seller location and product category, and a set of tax rules and mappings. To handle the details of these calculations we partner with Vertex, and issue a call to their <a href=\"https:\/\/www.vertexinc.com\/\">tax engine<\/a> via the Quotation Request API to get the right amount to show in our buyer&#8217;s cart. <\/p>\n<p>Vertex ensures accurate and efficient tax management and continuously updates the tax rules and rates for jurisdictions around the world. The two main API calls we use are Quotation Request and DistributeTaxRequest SOAP calls.<\/p>\n<p>When the buyer proceeds to payment, an order is created, and we call back to Vertex with a DistributeTaxRequest sending the order information and tax details. We sync information with Vertex through the order fulfillment lifecycle. To keep things up to date in case an order is canceled or a refund needs to be issued later on, we inform the details of the cancellation and refunds to the tax engine via DistributeTaxRequest. This ensures that when Vertex generates tax reports for us they will be based on a complete record of all the relevant transactions.<br \/>\nEtsy collects the tax from the buyers and remits that tax to the taxing authority, when required. <\/p>\n<p><strong>Generate tax details for reporting and audit purpose<\/strong><\/p>\n<p>Vertex comes with a variety of report formats out of the box, and gives us tools to define our own. When Etsy calls the Distribute Tax API, Vertex saves the information we pass to it as raw metadata in its tax journal database. A daily cron job in Vertex then moves this data to the transaction detail table, populating it with tax info. When reports and audit data are generated, we download these reports and import to Etsy\u2019s bigdata and the workflow completes.<\/p>\n<figure>\n<img data-recalc-dims=\"1\" decoding=\"async\" alt=\"\" src=\"https:\/\/i0.wp.com\/i.etsystatic.com\/inv\/b7e136\/5660475277\/inv_fullxfull.5660475277_6aqobaes.jpg?w=1280&#038;ssl=1\"><br \/>\n<\/figure>\n<p><strong>Mapping the Etsy taxonomy to tax categories<\/strong><\/p>\n<p>Etsy maintains product categories to help our buyers find exactly the items they&#8217;re looking for. <\/p>\n<p>To determine whether transactions are taxed or exempt it&#8217;s not enough to know item prices and buyer locations: we have to map our product categories to Vertex&#8217;s rule drivers. That was an effort involving not just engineering but also our tax and analytics teams, and with the wide range of Etsy taxonomy categories it was no small task.<\/p>\n<p><strong>Handling increased API traffic<\/strong><\/p>\n<p>Coping with the continuous increase in traffic and maintaining the best checkout experience without delays has been a challenge all the time. Out of the different upgrades we did, the most important ones were to switch to multiple instances for vertex calls and shadowing.<\/p>\n<p><strong>Multiple Instance upgrade<\/strong><\/p>\n<p>In our initial integration, we were using the same vertex instance for Quotation and Distribute calls. And the same instance was responsible for generating the reports. This report generation started to affect our checkout experience. <\/p>\n<p>Reports are generally used by our tax team and they run them on a regular basis. But on top of that, we also run daily reports to feed the data captured by Vertex back into our own system for analytics purposes.<\/p>\n<p>We solved this by routing the quotation calls to one instance and then distributing them to the other. This helped in maintaining a clear separation of functionalities, and avoided interference between the two processes. We had to align the configurations between the instances as well.<br \/>\nSplitting up the quotation and distribution calls opened up the door to horizontal scaling, now we can add as many instances of each type and load balance the requests between instances. <\/p>\n<p>Eg: When a request type lists multiple instances, we load balance between the instances by using the cart_id for quotations and receipt_ids for distributes I.e. cart_id % quotation_instance_count<\/p>\n<figure>\n<img data-recalc-dims=\"1\" decoding=\"async\" alt=\"\" src=\"https:\/\/i0.wp.com\/i.etsystatic.com\/inv\/55e80d\/5612390760\/inv_fullxfull.5612390760_2x0ox160.jpg?w=1280&#038;ssl=1\"><br \/>\n<\/figure>\n<figure>\n<img data-recalc-dims=\"1\" decoding=\"async\" alt=\"\" src=\"https:\/\/i0.wp.com\/i.etsystatic.com\/inv\/54571d\/5660478985\/inv_fullxfull.5660478985_h59bbdge.jpg?w=1280&#038;ssl=1\"><br \/>\n<\/figure>\n<p><strong>Shadow logging<\/strong><\/p>\n<p>Shadow logging the requests helped us to simulate the stress on Vertex and monitor the checkout experience. We used this technique multiple times  in the past.<\/p>\n<p>Whenever we had situations like, for example, adding five hundred thousand more listings whose taxes would be passed through the Vertex engine, we were concerned that the increase in traffic might impact buyer experience. To ensure it wouldn&#8217;t, we tested for a period of time by slowly ramping shadow requests to Vertex: &#8220;Shadow requests&#8221; are test requests that we send to Vertex from orders, but without applying the calculated tax details to buyers&#8217; carts. This will simulate the load on vertex and we can monitor the cart checkout experience. <\/p>\n<p>Once we have done shadowing and seen how well Vertex handled the increased traffic, we are confident that releasing the features ensures it would not have any performance implications.<\/p>\n<p><strong>Conclusion<\/strong><\/p>\n<p>Given the volume of increasing traffic and the data involved, we will have to keep improving our design to support those. We&#8217;ve also had to address analytics, reporting, configuration sync and many more in designing the system, but we&#8217;ll leave that story for next time.<\/p>\n<\/div>\n<div class=\"pvc_clear\"><\/div>\n<p id=\"pvc_stats_1474\" class=\"pvc_stats total_only\" data-element-id=\"1474\" style=\"\"><i class=\"pvc-stats-icon medium\" aria-hidden=\"true\"><svg xmlns=\"http:\/\/www.w3.org\/2000\/svg\" version=\"1.0\" viewbox=\"0 0 502 315\" preserveaspectratio=\"xMidYMid meet\"><g transform=\"translate(0,332) scale(0.1,-0.1)\" fill=\"\" stroke=\"none\"><path d=\"M2394 3279 l-29 -30 -3 -207 c-2 -182 0 -211 15 -242 39 -76 157 -76 196 0 15 31 17 60 15 243 l-3 209 -33 29 c-26 23 -41 29 -80 29 -41 0 -53 -5 -78 -31z\"\/><path d=\"M3085 3251 c-45 -19 -58 -50 -96 -229 -47 -217 -49 -260 -13 -295 52 -53 146 -42 177 20 16 31 87 366 87 410 0 70 -86 122 -155 94z\"\/><path d=\"M1751 3234 c-13 -9 -29 -31 -37 -50 -12 -29 -10 -49 21 -204 19 -94 39 -189 45 -210 14 -50 54 -80 110 -80 34 0 48 6 76 34 21 21 34 44 34 59 0 14 -18 113 -40 219 -37 178 -43 195 -70 221 -36 32 -101 37 -139 11z\"\/><path d=\"M1163 3073 c-36 -7 -73 -59 -73 -102 0 -56 133 -378 171 -413 34 -32 83 -37 129 -13 70 36 67 87 -16 290 -86 209 -89 214 -129 231 -35 14 -42 15 -82 7z\"\/><path d=\"M3689 3066 c-15 -9 -33 -30 -42 -48 -48 -103 -147 -355 -147 -375 0 -98 131 -148 192 -74 13 15 57 108 97 206 80 196 84 226 37 273 -30 30 -99 39 -137 18z\"\/><path d=\"M583 2784 c-38 -19 -67 -74 -58 -113 9 -42 211 -354 242 -373 16 -10 45 -18 66 -18 51 0 107 52 107 100 0 39 -1 41 -124 234 -80 126 -108 162 -133 173 -41 17 -61 16 -100 -3z\"\/><path d=\"M4250 2784 c-14 -9 -74 -91 -133 -183 -95 -150 -107 -173 -107 -213 0 -55 33 -94 87 -104 67 -13 90 8 211 198 130 202 137 225 78 284 -27 27 -42 34 -72 34 -22 0 -50 -8 -64 -16z\"\/><path d=\"M2275 2693 c-553 -48 -1095 -270 -1585 -649 -135 -104 -459 -423 -483 -476 -23 -49 -22 -139 2 -186 73 -142 361 -457 571 -626 285 -228 642 -407 990 -497 242 -63 336 -73 660 -74 310 0 370 5 595 52 535 111 1045 392 1455 803 122 121 250 273 275 326 19 41 19 137 0 174 -41 79 -309 363 -465 492 -447 370 -946 591 -1479 653 -113 14 -422 18 -536 8z m395 -428 c171 -34 330 -124 456 -258 112 -119 167 -219 211 -378 27 -96 24 -300 -5 -401 -72 -255 -236 -447 -474 -557 -132 -62 -201 -76 -368 -76 -167 0 -236 14 -368 76 -213 98 -373 271 -451 485 -162 444 86 934 547 1084 153 49 292 57 452 25z m909 -232 c222 -123 408 -262 593 -441 76 -74 138 -139 138 -144 0 -16 -233 -242 -330 -319 -155 -123 -309 -223 -461 -299 l-81 -41 32 46 c18 26 49 83 70 128 143 306 141 649 -6 957 -25 52 -61 116 -79 142 l-34 47 45 -20 c26 -10 76 -36 113 -56z m-2057 25 c-40 -58 -105 -190 -130 -263 -110 -324 -59 -707 132 -981 25 -35 42 -64 37 -64 -19 0 -241 119 -326 174 -188 122 -406 314 -532 468 l-58 71 108 103 c185 178 428 349 672 473 66 33 121 60 123 61 2 0 -10 -19 -26 -42z\"\/><path d=\"M2375 1950 c-198 -44 -350 -190 -395 -379 -18 -76 -8 -221 19 -290 114 -284 457 -406 731 -260 98 52 188 154 231 260 27 69 37 214 19 290 -38 163 -166 304 -326 360 -67 23 -215 33 -279 19z\"\/><\/g><\/svg><\/i> <img data-recalc-dims=\"1\" loading=\"lazy\" decoding=\"async\" width=\"16\" height=\"16\" alt=\"Loading\" src=\"https:\/\/i0.wp.com\/dev95.site\/wp-content\/plugins\/page-views-count\/ajax-loader-2x.gif?resize=16%2C16&#038;ssl=1\" border=\"0\" \/><\/p>\n<div class=\"pvc_clear\"><\/div>","protected":false},"excerpt":{"rendered":"<p>In the past, sellers were responsible for managing and fulfilling their own tax obligations. However, more and more jurisdictions are now requiring marketplaces such as Etsy to collect the tax from buyers and remit the tax to the relevant authorities.<\/p>\n<div class=\"hosteria-entry-more\"><a href=\"https:\/\/dev95.site\/ar\/behind-the-scenes-a-glimpse-into-tax-calculations\/\" class=\"no-underline font-light  group-hover:text-primary-800 dark:group-hover:text-primary-300 py-1\">Read more &gt;&gt;&gt;<\/a><\/div>\n<div class=\"pvc_clear\"><\/div>\n<p id=\"pvc_stats_1474\" class=\"pvc_stats total_only\" data-element-id=\"1474\" style=\"\"><i class=\"pvc-stats-icon medium\" aria-hidden=\"true\"><svg xmlns=\"http:\/\/www.w3.org\/2000\/svg\" version=\"1.0\" viewbox=\"0 0 502 315\" preserveaspectratio=\"xMidYMid meet\"><g transform=\"translate(0,332) scale(0.1,-0.1)\" fill=\"\" stroke=\"none\"><path d=\"M2394 3279 l-29 -30 -3 -207 c-2 -182 0 -211 15 -242 39 -76 157 -76 196 0 15 31 17 60 15 243 l-3 209 -33 29 c-26 23 -41 29 -80 29 -41 0 -53 -5 -78 -31z\"\/><path d=\"M3085 3251 c-45 -19 -58 -50 -96 -229 -47 -217 -49 -260 -13 -295 52 -53 146 -42 177 20 16 31 87 366 87 410 0 70 -86 122 -155 94z\"\/><path d=\"M1751 3234 c-13 -9 -29 -31 -37 -50 -12 -29 -10 -49 21 -204 19 -94 39 -189 45 -210 14 -50 54 -80 110 -80 34 0 48 6 76 34 21 21 34 44 34 59 0 14 -18 113 -40 219 -37 178 -43 195 -70 221 -36 32 -101 37 -139 11z\"\/><path d=\"M1163 3073 c-36 -7 -73 -59 -73 -102 0 -56 133 -378 171 -413 34 -32 83 -37 129 -13 70 36 67 87 -16 290 -86 209 -89 214 -129 231 -35 14 -42 15 -82 7z\"\/><path d=\"M3689 3066 c-15 -9 -33 -30 -42 -48 -48 -103 -147 -355 -147 -375 0 -98 131 -148 192 -74 13 15 57 108 97 206 80 196 84 226 37 273 -30 30 -99 39 -137 18z\"\/><path d=\"M583 2784 c-38 -19 -67 -74 -58 -113 9 -42 211 -354 242 -373 16 -10 45 -18 66 -18 51 0 107 52 107 100 0 39 -1 41 -124 234 -80 126 -108 162 -133 173 -41 17 -61 16 -100 -3z\"\/><path d=\"M4250 2784 c-14 -9 -74 -91 -133 -183 -95 -150 -107 -173 -107 -213 0 -55 33 -94 87 -104 67 -13 90 8 211 198 130 202 137 225 78 284 -27 27 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This site is optimized with the Yoast SEO plugin v28.5 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>Behind the Scenes - A Glimpse into Tax Calculations - Dev95<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/dev95.site\/ar\/behind-the-scenes-a-glimpse-into-tax-calculations\/\" \/>\n<meta property=\"og:locale\" content=\"ar_AR\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Behind the Scenes - A Glimpse into Tax Calculations - Dev95\" \/>\n<meta property=\"og:description\" content=\"In the past, sellers were responsible for managing and fulfilling their own tax obligations. 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